Top Shops 2012: Striking a Careful Balance

It’s all about profits and margins this year—at least according to Wide-Format Imaging’s 2012 Top 40 Shops. Whether you’re talking about the national economy, pricing, commoditization, the difficulties in hiring, training, and retaining employees, local, national, and international competition, credit availability, interest rates, government regulations, or sustainability, it’s all about the margins—and profits.

“We all have to become better business managers and sales aware,” says Vista Color Imaging Inc.’s CEO, Pete Gallo. “We need to run a tighter ship’and continue to become more efficient and cost conscious.”

“To remain competitive in the markets we serve, we at times must match price and lower our pricing to win jobs and retain clients. This, along with increased raw media and material costs, finds us yielding a lower margin than ever before,” says Gary Paulin, co-owner, Harmonic Media. “Without a doubt, the last few years have proved to be difficult for businesses in all parts of the globe and even though we’re only a few months into 2012, unsettled world conditions continue to make running a business anything but usual.”

“I think the overall economic uncertainty is the biggest threat to small business at the moment,” says John Rhodes, owner, Colorchrome Atlanta, Inc. “We need a more business friendly government to keep out of our way so we feel comfortable investing in our economy.”

While maintaining margins and growing profits is at the heart of everyone’s plan for 2012, where will this growth come from? According to industry leaders it’s from investments—investments in new technology and expanding marketing efforts into social media; an uncharted territory for some.

“It’s a balancing act,” according to Ken Madsen, owner, Graphic Systems Group. Shops need to balance between committing to new technologies that give them more efficiencies and cost savings on output and having the cash to invest in the technology without strapping the company.

“Costs have continued to rise, but selling price has not,” says Shane Beard, president, FastSigns of Naperville, IL. “To combat this I must invest in more technology that allows me to print faster and less expensively. Technology is moving so fast that leasing equipment is not as attractive as it once was, since the leases sometime outlast the useful life of the equipment!”

“I feel it in my gut that our industry is in an economic rebound. This has given us the confidence to start investing again in new technology,” says Gary Schellerer, VP Operations, Signs by Tomorrow of Bloomingdale, IL. “This year we have already invested in new equipment from EFI and Zund. The last time we invested this much money was in 2005.”

Schellerer continues, “Bringing in new technology always creates the need for change. Change can be one of the biggest challenges a team can face. But change is typically necessary to keep up with some of our competition. Although we expect this year to be challenging, knowing that this change is making our organization stronger gives these difficulties a lining of joy.”

“As we turn from survival to growth mode in 2012, our biggest challenge will be to recruit and hire great talent to keep up with our growth,” says Tom Truna, owner, Big Ink Display Graphics. “We will use social media such as Facebook, blogging, and LinkedIn to share our company core values and culture and to differentiate us from our competition.”

“We believe more than ever that with social media tools, effective networking, and by nurturing key relationships, we can grow our gross revenues by well over 25 percent this year, essentially doubling our market share in Colorado,” says Paulin.

The Numbers

Overall, the numbers for this group were very positive, even showing a substantial increase over last year’s numbers. As a group, shops gained on average about 14.29 percent, up from 7.82 percent in 2010—and owners were positive that 2012 would see growth again.

The age of our companies averaged out a little over 28 years (28.45 years), with our oldest founded in 1898, 114 years ago: Philadelphia, PA-based Berry & Homer. Filmet Color Laboratories, Inc. from Cheswick, PA, is the only other firm on the list to top out at more than a century old—boasting 102 years. Again this year, we have five shops with more than 50 years in business: PacBlue Printing (62), Thomas Reprographics, Inc. (56), Alabama Graphics (56), Coloredge New York * Los Angeles (53), and Sharpe Images (51). Our youngest shop was established in 2010: Digital Graphics Express, based in Concord.

The total number of locations is up this year, 106 versus 98 in 2010. While most shops had only a handful of locations—ranging from one to four—five of our Top 40 have five or more locations, with Thomas Reprographics, Inc. topping out with 28, down from last year’s 31. New York-based Duggal Visual Solutions and San Diego, CA-based reproHAUS Corp. have six locations currently, while Coloredge New York * Los Angeles and Winston-Salem, NC-based Sharpe Images boast five apiece. Additionally, the Top 40 Shops have plans to open up 20 new locations in 2012, down 10 from last year’s projected number.

The Top Shops offer a range of capabilities and services, both color and black-and-white graphics, as needed. Fifty-eight percent of the Top 40 offer both black-and-white and color graphics while 42 percent are “color-only” shops. When it comes to output sizes produced, the numbers stay pretty consistent with the report from last year. As an average, 51.21 percent of the top shops’ output is wide-format (36-96 inches in width), down from 53.55 percent in 2010. Grand-format (96-inches plus) grabs the next largest share with 24.38 percent, down from 26.82 percent the previous year. Medium-format (24-35 inches) gained the most traction this year, topping out at 18.21 percent, up from 14.95 percent. The remaining 6.21 percent is in small-format (14-inches and smaller documents) down up from 7.32 percent.

We’ve seen some shift in the types of work being done in shops this year. Retail and POP displays and signs (including floor graphics) moved to the lead position, up three percent to 18.49 percent. This is probably tied directly in with positive trending of the Consumer Confidence Index—showing gains during January, March, April, July, November, and December 2011—and the subsequent advertising push from retail stores and manufacturers to encourage consumers to spend more.

Banners and signs moved from the number one position to number two with 16.26 percent. Exhibit and trade show graphics (12.36 percent) pull in the next largest segment of business, down a few ticks from last year. Fleet and vehicle graphics showed a slight decrease this year, down about two percent to 9.41 percent. Fabric and textile printing (6.72 percent) saw a nearly three percent decrease. Billboards and building wraps (6.67 percent), backlit display graphics (6.10 percent), engineering drawings (5.95 percent), posters (5.18 percent), décor printing (4.13 percent), fine art and museum graphics (3.97 percent), specialty printing and graphics (3.08 percent), and other applications (1.69 percent) round out the rest of the applications.

New Market Opportunities

The Top 40 pointed to several key market niches they believe had the most opportunity for growth in 2012. Not surprisingly, digital signage and LED displays were at the top of that list. While digital signage is not within the reach of some sign and digital graphics companies, ignoring it—and its impact on the market—is not smart for your business. While digital signage is not every PSP’s cup of tea, the technology will begin to move some projects—wayfinding signage in hotels, conference centers, and airports to digital billboards—away from the traditional sign and graphics market.

The next four market segments rounding out the top five growth areas—window graphics, POP and retail, corporate branding, and fabric graphics—are all tied together and, as mentioned above, the retail market, which saw a tremendous push in 2011, seems to be continuing on into 2012. Today, retailers are looking to engage with the consumer in more ways than just inside the retail environment. They have expanded the scope of their campaigns from the brick-and-mortar stores to online—ecommerce and social media marketing—and out-of-home advertising opportunities. PSPs have a real opportunity in this space to support retailers by helping them to provide a unified message to their customers—no matter what platform they wish to use to engage the consumer.

“Our challenge is to ensure we service our existing channels while also adding new revenue streams and markets,” says Jittu Sarna, owner, Inkjet International. “This goal requires us to apply existing and new resources and capital. An example of this strategy is to leverage appropriate Web technology to develop customer relationships further, educate and provide a different purchase method for certain products.”